Steel Dynamics (NASDAQ: STLD) is the fifth largest producer of carbon steel products in the United States. The firm operates five mid-western electric-furnace mini-mills, producing merchant bars, engineered bar products, wide-flange beams, rails, and flat-rolled steels. It also runs six fabrication facilities, making joists, girders, and decking for non-residential construction projects. Steel scrap is processed at 42 locations in the eastern U.S. and Canada. Nucor (NYSE: NUE) and U. S. Steel (NYSE: X) are major competitors.

The company raised its second quarter outlook last week, citing "stronger than anticipated shipping volume and selling values for flat-rolled steel products and stronger volume and margins in recycling." Management predicted Q2 EPS of 90-95 cents (80-90 cent prior estimate, 89 cent Street consensus).

MOST NOTEWORTHY: EV3, Steel Dynamics and Sonic were today's noteworthy initiations:

• JP Morgan initiated EV3 (NASDAQ: EVVV) with a Neutral rating. The firm sees risk to guidance and finds it too early to recommend the stock.
  
• Steel Dynamics (NASDAQ: STLD) was assumed with an Overweight rating at Morgan Stanley.
  
• Lehman initiated Sonic (NASDAQ: SONC) with an Overweight rating.

OTHER INITIATIONS:

• HSBC initiated Rostelecom (NYSE: ROS) with an Underweight rating and $36.50 target.
  
• Keefe Bruyette assumed German American Bancorp (NASDAQ: GABC) with a Market Perform rating and $13 target.
  
• JP Morgan initiated Perdigao (NYSE: PDA) with an Overweight rating.

Steel Dynamics (NASDAQ: STLD) is the fifth largest producer of carbon steel products in the United States. The firm operates five mid-western electric-furnace mini-mills, producing merchant bars, engineered bar products, wide-flange beams, rails, and flat-rolled steels. It also runs six fabrication facilities, making joists, girders, and decking for non-residential construction projects. Steel scrap is processed at 42 locations in the eastern U.S. and Canada. Nucor (NYSE: NUE) and U. S. Steel (NYSE: X) are major competitors.

The company raised its first quarter and fiscal year outlooks last week, citing higher than anticipated flat rolled steel pricing and improved scrap processing. Management predicted Q1 EPS of $1.25-$1.30, versus Street consensus of $1.18. It also expected FY08 EPS of $5.25-$5.75, versus consensus of $5.35.

Readers of this space know that my investment bias is toward large-cap companies with demonstrated business models and a competitive advantage in established markets, preferably with a favorable global trend as a support. With this in mind, Steel Dynamics is worth a review.

Steel Dynamics (NASDAQ: STLD) operates five electric arc furnace mini-mills and six steel fabrication facilities. STLD's customers include companies in the automotive, construction, and manufacturing industries, as well as steel processors and service centers, primarily in the Midwest U.S.

Analysts expect Steel Dynamics to post robust, 45-55% revenue growth in F2008, after an impressive 27% rise in F2007. Analysts also expect continued, strong demand for structural and bar products, and a recovery in STLD's flat-rolled steel business.

Further, analysts also say the sector's sales volatility will decline over the life of the business cycle, as a result of consolidation/mergers. STLD's strong balance sheet and low cost structure add to the favorable picture. The Reuters F2008/F2009 EPS consensus estimates for STLD are $5.30/$5.65.

The risks? A failure of the flat-rolled segment to recover would obviously hurt STLD's results.

The First Call mean rating for STLD is: Buy [11 firms]. Mean 2008 target: $61 [high: $80, low: $50].

Stock Analysis: Steel Dynamics is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from STLD's shares. Sell / Stop Loss if you were to purchase shares in this company: $38.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Steel Dynamics Inc. (NASDAQ: STLD) has hit a new one-year high today despite the financial sector's woes after the company's CEO said that 2008 earnings could exceed Wall Street expectations. Most steel-makers are getting a lift today from this good news. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on STLD.

STLD rose during the early part of this year but has been generally sideways for the past six months. STLD opened this morning at $47.95. So far today the stock has hit a low of $47.58 and a high of $50.56. As of 11:20, STLD is trading at 50.04, up 1.80 (3.8%). The chart for STLD looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $35 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in 3 months as long as STLD is above $35 at January expiration. Steel Dynamics would have to fall by more than 30% before we would start to lose money. Learn more about this type of trade here.

STLD hasn't been below $35 since March and has shown support around $45 recently. This trade could be risky if the company fails to meet now-raised expectations, but even if that happens, this position could be protected by the two times that STLD bounced just above $35 in the past 8 months.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in STLD.

Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.

Neil Macneale, editor of 2 for 1 (a newsletter focused exclusively on stocks that have announced stock splits), chose two stocks in the Top Picks for 2007 report, and both picks qualified him for our Top 20 Advisors. His previous selections were Chaparrel Steel Co. (NASDAQ: CHAP) and Steel Dynamics Inc. (NASDAQ: STLD).

As of June 1, 2007, Steel Dynamics has risen 49%. while Chapparel had scored a gain of 67%. Here is Neil's original recommendation for these issues.

Updating his outlook on these steel stock, he now says, "This rate of return cannot continue forever, but there is every reason to believe these remain good stocks to own.

"Steel should continue to perform, given the strength of the economy, even without a strong housing market. As the housing market improves, steel should get even stronger. In both cases, fundamentals for these companies remain strong and the stocks still sell at a discount to their peers."

MOST NOTEWORTHY: PennantPark (PNNT), Delta Air Lines (DAL) and several insurance companies were today's noteworthy initiations:

• PennantPark Investment Corp. (NASDAQ: PNNT) was initiated with a Buy rating and $17 target at Jefferies. The finds shares compelling given the potential dividend growth and book multiple expansion. PennantPark was also initiated at Keefe Bruyette with an Outperform rating and $18 target, at Banc of America with a Buy rating and $16 target and at Friedman Billings with an Outperform rating and $17 target.
• Delta Air Lines Inc. (NYSE: DAL) was initiated at Bear Stearns with a Peer Perform rating and at Cathay Financial with an Outperform rating.
• Banc of America initiated RenaissanceRe Holdings Ltd. (NYSE: RNR) with a Buy rating and Montpelier Re Holdings Ltd. (NYSE: MRH) and IPC Holdings Ltd. (NASDAQ: IPCR) with Neutral ratings.

OTHER INITIATIONS:

• Dell Inc. (NASDAQ: DELL) was initiated with a Hold rating and $24 target at Soleil.
• Robert W. Baird initiated Avery Dennison Corp. (NYSE: AVY) with an Outperform rating.
• Steel Dynamics Inc. (NASDAQ: STLD) was initiated with a Buy rating and $58 target at Citigroup.
• Nollenberger initiated Lakes Entertainment Inc. (NASDAQ: LACO), MTR Gaming (NASDAQ: MNTG) and Full House Resorts (NYSE: FLL) with Buy ratings and Monarch Casino (NASDAQ: MCRI) with a Neutral rating.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

The world steel industry is in a state of flux. Unsurprisingly, the winning firms are those best able to achieve and maintain attractive measures of efficiency, management effectiveness, profitability, growth and valuation. A Fort Wayne, Indiana steel maker is consistently among those generating solid parameters.

Steel Dynamics (NASDAQ:STLD) is the fifth largest producer of carbon steel products in the United States, with annual shipments of 4.7 million tons. The firm operates five mid-western electric-furnace mini-mills, producing merchant bars, engineered bar products, wide-flange beams, rails and flat-rolled steels. Its fabrication operation makes joists, girders, and decking for non-residential construction projects. Last week, the company reached an agreement to purchase two privately owned metals recycling facilities in eastern Tennessee.

STLD shares popped late last month, in response to the United States Steel (NYSE:X) agreement to purchase tubular steel manufacturer Lone Star Technologies (NYSE:LSS). The steel industry is in the midst of an active round of consolidation moves and the U.S. Steel announcement re-energized speculation of further acquisitions. Most analysts consider Steel Dynamics to be one of the more attractive takeover targets. UBS subsequently upgraded the shares to "buy", citing near-term benefits from higher sheet prices and long-term growth prospects. The STLD price is now consolidating the gain in a bullish "flag" pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, brokers recommend the issue with two "strong buys", two "buys" and six "holds". The STLD P/E ratio (11.62), PEG ratio (1.16), Price to Sales ratio (1.46), Price to Book ratio (3.45), Price to Cash Flow ratio (9.23), Sales Growth rate (47.43%), EPS Growth rate (57.50%), Operating Margin (20.35%), Return on Assets (19.81%), Return on Investment (23.37%), Return on Equity (37.59%), Revenue per Employee ($928k) and Net Income per Employee ($114k) compare favorably with industry, sector and S&P 500 averages.

Institutions own about 87 percent of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $22.58 and $44.62. A stop-loss of $38.25 looks good here. Note that the firm is next expected to release quarterly results on April 16th, after the close.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

US Steel Corp. (NYSE: X) today agreed to acquire Lone Star Technologies Inc. (NYSE: LSS) for $2.1 billion, giving it a stronger foothold with energy companies. It's also the latest sign of the growing consolidation in the industry.

Acquiring Dallas-based Lone Star will make US Steel the largest producer of products such as tubing used in oilfields, the Wall Street Journal (subscription required) . This is a smart acquisition since high prices have caused energy companies to increase spending on exploration and products .

Shares of US Steel are up more than 33 percent this year news of the deal pushed up shares of other steel companies. including Nucor Corp. (NYSE:NUE), AK Steel Holding Corp. (NYSE:AKS) and Steel Dynamics Inc. (NASDAQ: STLD).

. Wall Street doesn't have high hopes US Steel. Analysts have an average price target on the stock of $88.93, below the $97.61 where it closed yesterday.

MOST NOTEWORTHY: The more notable initiations today included THQ Inc (THQI), LaSalle Hotel Properties (LHO) and OfficeMax Inc (OMX):

• William Blair started THQ Inc (NASDAQ: THQI) with an Outperform rating, as they are positive on shares based on earnings upside potential from the new video game cycle.

• RBC initiated shares of LaSalle Hotel Properties (NYSE: LHO) with an Outperform rating and $52 target, as the firm expects growth to be driven by portfolio repositioning efforts and renovations.

• OfficeMax Inc (NYSE: OMX) was initiated at Bear Stearns with a Peer Perform rating citing a balanced risk/reward.

OTHER INITIATIONS:

• Lehman Brothers initiated both AK Steel Holding Corp (NYSE: AKS) and Steel Dynamics Inc (NASDAQ: STLD) with Equal Weight ratings.

• Wachovia started Beazer Homes USA Inc (NYSE: BZH) with a Market Perform rating, saying the company has few discernible competitive advantages over other public homebuilders and lacks catalysts.

• Cowen initiated Rackable Systems Inc (NASDAQ: RACK) with a Neutral rating.

• Bear Stearns re-initiated Tiffany & Co (NYSE: TIF) with a Peer Perform rating.

• Leerink Swann started Align Technology (NASDAQ: ALGN) with an Outperform rating, with a range of $21-$23, believing the company's Invisalign technology is well positioned for renewed growth.

• Bernstein initiated Murphy Oil Corp (NYSE: MUR) with an Outperform rating.

• Cascade Financial Corp (NASDAQ: CASB) was initiated with a Hold rating and $19 target at Sandler.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Just in time for Valentine's Day, Kiplinger's has published a list of "Stocks to Love Forever." I have two problems with that headline. One, you should never fall in love with any stock. Moreover, there are few stocks worth holding forever.

This is, of course, a gimmick. Personal finance magazines are filled with them because there are only so many ways you can write "10 surefire stock picks that will make you rich" or "Haven't made a killing in the market? Then you are a loser."

Anyway, the article picks out stocks that lots and lots of people like, which isn't particularly brave. That means that the good news may already be factored into the price. When reviewing these picks, it's important to remember that while these companies may be great, their stocks may not be the best buy right now.

Goldman Sachs Group Inc. (NYSE:GS) is up 50 percent, Steel Dynamics Inc. (NASDAQ:STLD) is up 72 percent and Stryker Corp. (NYSE:SYK) is up 33 percent. The two laggards in the article are Starbucks Corp. (NASDAQ:SBUX) , which is down 1.2 percent, and York Water Co. (NASDAQ:YORW), which is off 4 percent.

Most analysts consider Starbucks a buy. The median target price for the coffee chain is $43.12, about $10 ahead of where it's currently trading. York Water, which isn't widely followed, is a different story. Only on of the three analysts who follow the company consider it a buy, the two others rate it a hold. Only one analyst has set a target price and its $20. York Water is trading at about $17.

Let me repeat what every market pundit says, don't fall in love with any stock. Once you let emotions decide your investment strategy, you are asking for big trouble.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Stock split expert Neil Macneale looks to the steel industry for both of his picks for 2007; Steel Dynamics (NASDAQ: STLD) is his top conservative investment while Chaparral Steel (NASDAQ: CHAP) gets the nod as his favorite speculation.

The editor of 2-for-1 explains, "As a group, stocks that have split have been found to outperform the market and, by investing only in splits, the portfolio is exploiting that anomaly. Our model portfolio is 'laddered' by buying and selling one stock each month, thus keeping the portfolio constantly at 30 stocks.

"Several steel companies and mining companies have announced splits in the recent months. Steel is historically a cyclical business, but the U.S. economy is strong at the moment, and should only get stronger as the housing sector recovers.

"In addition, U.S. steel companies now have pricing power they haven't enjoyed for decades, due to demand in Asia for their own locally produced steel. For these reasons steel, in general, should have a good run for the next year or two, and two companies, in particular, are well positioned to lead the pack.